Suitability #5 - Is Indexed Universal Life a Good Choice?

November 13, 2018

The investment of the cash values that support a permanent Life Insurance policy are vital to the success of the protection. Whether the goal is for a death benefit to be paid sometime in the future, or a methodical transfer of tax deferred legacy assets, the underlying investment should be carefully chosen.

Life insurance is always implemented with a goal in mind:

Protecting income

Avoiding taxes

Special needs

Asset transfer

An unsuccessful outcome of the goal can be boiled down to two issues, 1.) The wrong product choice, and/or 2.) Failure to conduct periodic audits of the policy.

Examining all the available choices in filling a permanent life insurance need can range from the ultra-conservative Whole Life policy, (primarily supported by Fixed Income investment and heavy guarantees). To the polar opposite featuring heavy risk with a Variable Life contract where you as the owner control the investment.

In between these two selections is Indexed Universal Life (IUL), where the underlying investment is pegged to the performance of an equity market index, most notably the S&P. IUL is an innovation of permanent coverage that offers the upside of the equity market year to year with a cap, but also includes a “ Zero Loss” floor for those years when the equity markets have negative returns. Some might suggest that IUL offers the best of both Whole Life with guarantees and Variable Life with its investment in equities in a single contract.

Regardless of the permanent life contract, the correct choice by the insured/owner can only be determined by starting with the need, examining the objective, and then examining the alternative to meet the goal. A side by side fully disclosed examination of options is always the best path to a successful outcome.

If you have questions about a proposed or current life insurance contract. Drop me an email, I can help. Contact me at 203-637-6655 or email sshepard@shepardinsgrp.com

Author: Steve Shepard

Founder/Principal, Shepard Insurance Group - At Shepard Insurance Group we begin every relationship with a face to face meeting with the client. In a comprehensive discussion of coverage needs, personal concerns, objectives and finally appetite for risk, we can arrive at the proper insurance solution. Understanding the client is the first step to accurate execution.